TABLE OF CONTENTS May 2002 - 0 comments

Movieola-Stornoway partnership unravels

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The never-officially-completed partnership between category two digi-net Movieola and Stornoway Communications disintegrated last month.

Since three of the four original partners which founded Movieola ended up being let go as a part of Stornoway's recent cutbacks (See Cablecaster, March 2002), Movieola's license holders have walked away from the partnership, with their short film channel.

According to one of those partners, Cal Millar, the firings ran counter to a partnership agreement that had yet to be made official. The agreement, said Millar, called for the four original partners of Channel Zero, the company which owns the Movieola category two digital license, to remain employed with Stornoway. All four, Romen Podzyhun, Millar, Anthony D'Andrea and Howard Balde, were hired by Stornoway in September, 2001 as the partnership began to take shape.

However, Balde and D'Andrea were among those let go in Stornoway's first round of cutbacks in February and Millar was fired in April. Podzyhun resigned shortly thereafter, signalling the partners' intentions to go it alone.

Millar told Cablecaster that the conditions of the partnership agreement was that all four would remain Stornoway employees after the deal was done. The firings, said Millar, coupled with Stornoway's unwillingness to re-hire them, "violates the deal."

Millar added that those conditions meant that Channel Zero was within its rights under terms of the deal to walk away. All four partners are now back running Channel Zero and Movieola.

Stornoway issued a statement which said in part that it provided secured loan financing to back Movieola's launch, which happened in September with the other 50-odd new digital channels, including Stornoway's i channel and bpm:tv. That financing has now ceased.

"The launch of the digital television networks in the fall of 2001 occurred in what turned out to be a most difficult time period in which to start to establish the new digital offerings," continues Stornoway's statement. "The difficulty of this environment was compounded by an economic downturn that resulted in fewer subscribers and less advertising revenue than anticipated by broadcasters and the digital television industry.

"Stornoway along with much of the industry took early steps to bring expenditures into line with revenue expectations.

"Stornoway regrets that agreement with the Movieola partners could not be maintained . . . We wish them success, and hope that they can build on the digital television service that we successfully launched and nurtured over the last seven months."

"That was expected," said Millar of the loan cut-off, adding Channel Zero has "enough financing to meet our ongoing obligations . . . we have a loan outstanding to them that is subject to repayment in the future."

Stornoway said it intends to pursue Channel Zero for immediate repayment of the loans, saying since the deal was never finished, that it is not bound by its loan repayment terms.

The behind-the-scenes matters should not affect the channel, said Millar, even though it emanates from Stornoway's Toronto broadcast centre. He added the company is now searching for another broadcast industry partner to take an ownership position. "We have every intention of expanding our distribution (of Movieola) into the United States and around the world, but it will take a partner with industry experience and the drive to succeed," said Podzyhun.

The partners are encouraged by early signs of Movieola's popularity. While he declined to release specific figures, Millar said among cable operators, Movieola ranks in the top 25 in terms of popularity among the new digi-nets and in the top 10 among DTH customers. He added Movieola's penetration was in the 25% range. "(The results) are almost exactly where we'd projected we would be," added Millar.

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